CESTAT Delhi Quashes ₹3 Lakh Penalty On Customs Broker, Finds No Evidence Of Knowledge Of Export Overvaluation

The Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has set aside a ₹3 lakh penalty imposed on a customs broker in a case relating to the alleged overvaluation of export goods by Sharp Enterprises. The tribunal held that there was nothing on record to show that he was involved in, or had knowledge of, the alleged overvaluation.

A bench of Technical Member P.V. Subba Rao observed:

“There is also nothing on record to show that the appellant had knowledge that the export goods were overvalued.”

The appellant, Ravi Dhanwariya, had filed six shipping bills as a Customs Broker on behalf of Sharp Enterprises.

The department suspected that the export goods were heavily overvalued in order to avail ineligible export benefits. Following an investigation and adjudication proceedings, a penalty of ₹3 lakh was imposed on the appellant.

The Tribunal noted that the question which needed to be answered was whether the Customs Broker had any knowledge of the alleged overvaluation or had abetted it.

It observed, “There is nothing in the investigation or in the impugned order or in the order of the Additional Commissioner which would show that the appellant was involved in overvaluing the exports.”

The Tribunal noted that the exporter and the overseas importer determine the prices of goods. It further noted that customs officers can examine export goods and re-determine their value under the law.

It observed, “The appellant, as the customs broker, had no right to either decide the prices of the goods or to question them or to re-determine the value.”

The tribunal also observed that a customs broker has no right to open and examine export goods and that such power vests only with customs officers.

The department argued that the appellant had not cooperated during the investigation despite summons having been issued to him. The Tribunal, however, held that non-cooperation during the investigation could not justify the penalty imposed on the appellant in the present case.

It observed, “However, penalty under section 114(iii) cannot be imposed for non-cooperation during investigation.”

Accordingly, the tribunal allowed the appeal and set aside the penalty with consequential relief.

For Appellant: Shri T. Chakrapani, Consultant; Ms. Gayathri, Shri Jiten Yadav and Shri Anil Kumar, Advocates

For Respondent: Shri Ram Parvesh Prasad, Authorised Representative